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South Asia Investor Review is focused on reporting, analyzing and discussing the economy and the financial markets of countries in South Asia, including Pakistan, Bangladesh and Sri Lanka. For investors looking to invest in emerging markets beyond BRIC countries (Brazil, Russia, India and China), this blog is designed to help international investors looking to learn about investing in South Asia with focus on Pakistan. Riaz has another blog called Haq's Musings at http://www.riazhaq.com

Is US Aid Good or Bad For Pakistan?

This year's Nobel Prize winning economist Angus Deaton of Princeton University considers foreign aid to developing nations a curse like the oft-mentioned resource curse of energy and mineral-rich nations of Africa and the Middle East.

Deaton has studied poverty in India and Africa and spent many decades working at the World Bank whose charter it is to fight poverty. He argues that, by trying to help poor people in developing countries, the rich world may actually be corrupting those nations' governments and slowing their growth and hurting the poor in the process. Prof William Easterly of New York University has published a paper titled "Can Foreign Aid Buy Growth?" that supports the view that increase in foreign aid has reduced economic growth in Africa.

In addition to being recipients of foreign aid, most African countries are also rich in resources ranging from oil and gas to diamonds and metals. Yet, their people are among the poorest in the world. Why is it? The biggest reason appears to be their corrupt leaders who pocket most of the proceeds from mining. They also siphon off a big chuck of foreign aid left after paying the expensive western consultants employed by aid agencies.

So where does Pakistan stand in this mix? Charts published by Washington Post show that Pakistan, in spite of not being a major exporter of minerals, enjoyed an average economic growth rate of about 5% from 1970 to 2008. This is about the same as India's but higher than Brazil's and Turkey's GDP growth rates. The economic growth rates for China and Korea are much higher than Pakistan's in this period.

Foreign aid to Pakistan has also been more effective in promoting economic growth than much of Africa. Even Dambisa Moyo, author of "Dead Aid" and a critic of western aid, acknowledges that the US aid for "the Green Revolution in India (and Pakistan) played vital roles in economic (re)construction" of the South Asian nations in 1960s and 1970s. The South Asian subcontinent could have faced starvation without this aid.

One of the key reasons for the success of Green Revolution was the ability of the human capital in India and Pakistan to absorb the technological knowhow that it brought along with money. Ms. Moyo offers the same reason for the success of Marshall Plan aid in Europe.

US aid to Pakistan after the Green Revolution has been much smaller as percentage of the nation's GDP and much less effective. Total foreign aid to Pakistan has dramatically declined from a peak of over10% of GDP to less than 2% of GDP now, too little to impact economic growth even if it is utilized better.

The launch of a $17 million collaborative project linking UC Davis and Pakistan’s leading agricultural university was celebrated today at UCD, which will receive $10 million of the funds.

The new U.S.-Pakistan Center for Advanced Studies in Agriculture and Food Security, funded by the U.S. Agency for International Development, will make it possible for faculty members and graduate students from both countries to study and do research at each other’s campuses. The project also is designed to update curriculum and technical resources at Pakistan’s University of Agriculture, Faisalabad.

Present for today’s ceremonial launch were dignitaries from Pakistan, USAID and UCD.

“UC Davis has been partnering with colleagues in Pakistan since 2009, sharing expertise in agriculture from crop production to post-harvest handling,” said James Hill, associate dean emeritus of International Programs for the College of Agricultural and Environmental Sciences at UCD.

“Establishment of this new center will allow us to build on those efforts, with a renewed emphasis on an exchange of faculty and graduate students,” he said.

During its first year of funding, the center will plan several workshops to assist the University of Agriculture, Faisalabad, with technology transfer and entrepreneurship to strengthen its connections to the private sector. UCD also will initiate programs in both research and curriculum development to improve graduate studies.

Hill noted that two other Pakistan-focused projects are already underway through the International Programs office, primarily in the area of horticultural crops and agricultural extension activities.

Agriculture is the largest sector of Pakistan’s economy, providing jobs for half of that country’s labor force. Some of the traditionally important crops in Pakistan are wheat, cotton, rice, sugar cane and maize. In recent years, crops like beans, peas, lentils, onions, potatoes, chilies and tomatoes also have increased in importance, along with fruit crops such as citrus and mangoes.

The newly funded center at UCD is the most recent of several partnerships of the U.S.-Pakistan Centers for Advanced Studies, a $127 million investment from USAID, linking universities in the two countries and using applied research to solve Pakistan’s challenges in energy, water and food security.

The overall program includes construction of laboratories, research facilities and libraries in Pakistan. Other participating U.S. universities include the University of Utah and Arizona State University, focusing on water and energy, respectively.

Deaton, however, believes that the poverty rates could be even higher. There is surely some omission in the surveys, which would mean that poverty is understated", Deaton told Hindustan Times in an interview.He also said that the economic growth in India is not as high as the government presents it to be. India is said to be world's fastest-growing economy at 7 per cent growth rate."Everyone's data can be improved. I think it is widely recognized that the national accounts in India are relatively weak. So what I am most worried about is that growth is not as high as the accounts show. Revisions that increase growth are more readily accepted than revisions that reduce growth. So I am more worried about growth being overstated than poverty being understated," he added.According to Deaton, the Indian government needs to invest more in nutrition, health and education of the young generation of the nation if it wants to overcome the growing poverty rate."Yes, though there are organizational and capacity problems that need to be overcome. In places where services don't work, for example, because of absenteeism, putting in more money is unlikely to help. But if other states can emulate the better services in the south, with more people demanding health and education, then we can make progress, and to do that, we will eventually need more money," he said.Deaton, the Princeton University Professor, has done a thorough analysis of consumption and poverty in India. He contributed majorly to estimating India's poverty rate in 1990s with his work on India's malnutrition.

European Union will provide assistance of six hundred and fifty three million euros to Pakistan for rural development and reduction of poverty.

A memorandum of understanding for the EU’s Multi Indicative Programme (2014-2020) with a commitment of €653 million was signed between the government of Pakistan and European Union. The signing of the agreement was witnessed by Minister for Finance and Economic Affairs Senator Ishaq Dar and ambassadors and representatives from EU member states.

The minister on this occasion said that the government appreciates the development assistance being given to Pakistan by EU. He appreciated the fact that the new MIP was almost double the amount of the previous programme. He said that building a stable, democratic and economically vibrant Pakistan was the aim of the government.

He said that the government was committed to achieving this objective and called upon the EU and its member countries to support Pakistan in this regard.

EU Ambassador Jean-Francois Cautain said that the €653 million EU multiannual indicative programme for Pakistan set out the EU’s development strategic objectives in support of a stable and democratic Pakistan, in line with the EU-Pakistan five years engagement plan 2012-2017, which framed the relationship between the two sides.

Japanese Envoy to Pakistan Takashi Kurai on Saturday said his country is Pakistan’s third largest donor.

He was speaking at the 65th anniversary of diplomatic relations between Japan-Pakistan. The event was organised by the English Speaking Union of Pakistan.

Kurai said that in the 90s Japan was the biggest donor of Pakistan. He said Japanese companies want a more stable environment in Pakistan for more investment. He said that the Prime Ministers of both countries had not visited each other’s countries for a long time. He hoped that these visits would take place in the near future. He said Japan supported Pakistan in healthcare, education, infrastructure development and other fields.

The envoy also said that both countries established diplomatic relations in 1952 and since then they have enjoyed excellent relations.

He said Japan is the only country that faced the horrors and destruction of the atomic bombs during WW2, but the Japanese showed resilience and patience and made the country’s economy stable.

Khalid Malik, president of the English Speaking Union of Pakistan and secretary general Muzafar Qureshi thanked the Japanese ambassador for attending the ceremony. They also praised his efforts for further boosting bilateral relations.

Up to Dh1.5 billion worth of sustainable development projects have been financed in Pakistan by the Abu Dhabi Fund for Development (ADFD), a new country report said on Monday.To date, the ADFD, a national entity for development aid, has supported Pakistan with grants and concessionary loans on behalf of the Abu Dhabi government, valued at Dh1.5 billion across nine sustainable development projects.

The ADFD’s country report issued to mark Pakistan’s Independence Day on August 14, highlighted that the nine development projects have significantly contributed to improving socioeconomic conditions in the country.The projects spanned diverse sectors, most notably transport, water and agriculture, healthcare.Mohammad Saif Al Suwaidi, Director-General of ADFD, said ADFD’s role in financing these sustainable development projects across Pakistan underscores the fraternal relations and strong bilateral ties that the UAE and Pakistan share.

Stressing the importance the UAE places on supporting developing countries, Al Suwaidi said: “The comprehensive and wide spanning portfolio of development projects supported by ADFD in Pakistan can certainly be attributed to the strong relations between our countries as well as the wise directives, guidance and support of the Abu Dhabi government.”Al Suwaidi added that ADFD believes in assisting beneficiary governments in achieving their economic, sustainable and development schemes and goals.“We are pleased that our support to the Pakistani government has elevated living standards and boosted strategic growth in that country,” he said.Notable projectsSome of the notable projects funded by ADFD in Pakistan include the Dh227 million construction of the UAE-Pakistani Friendship Road, which has helped link the southern and northern areas of the Waziristan region. The 72-km road serves three major cities and 20 villages and facilitates the movement of people and goods.In the health sector, ADFD administered an estimated Dh107 million Abu Dhabi government grant to develop two healthcare projects in Pakistan. In 2013, ADFD provided Dh94 million to construct the Emirates Hospital — an integrated speciality medical centre equipped with 1,000 beds.Furthermore, in 2006, ADFD allocated Dh13 million to fit out the Shaikh Zayed Hospital in Lahore with modern and internationally standardised equipment.ADFD’s contributions in the education sector include a Dh46 million grant earmarked for training colleges. This project led to the construction of three training colleges for individuals living in remote areas. These include Warsak College in the Khyber Pakhtunkhwa province, and Wana College and Spinkai Cadet College — both located in South Waziristan.ADFD also allocated Dh7 million to fund expansion works at the Shaikh Zayed International Academy (SZIA).In order to ensure an adequate and reliable power supply, ADFD provided a Dh66 million loan to rehabilitate the Tarbela Dam in 1981.ADFD and the Government of Pakistan have enjoyed strong and long-standing ties dating back to 1981. The synergies between the two sides continue to drive sustainable socioeconomic development across key sectors that benefit the citizens of Pakistan.

The U.S.-Pakistan Partnership for Agricultural Market Development (AMD), along with the Trade Development Authority of Pakistan (TDAP) and Government of Sindh held a conference in Karachi that brought together public-private stakeholders to discuss issues and challenges pertaining to Pakistan’s chili sector.

“We are proud of the role USAID has played for many years to support the development of Pakistan’s agriculture sector. The U.S. government is hopeful that these efforts will help Pakistan emerge as a major player in the international market,” said Deputy Mission Director Oghale Oddo. “We are confident that we can help Pakistani chili exports become more competitive in the international arena by introducing innovative technology and providing technical assistance.”

Through discussions and interaction during the conference, stakeholders reviewed and endorsed AMD’s efforts and shared solutions to problems faced by the industry.

USAID launched the U.S.-Pakistan Partnership for Agricultural Market Development in February 2015 to improve the ability of Pakistan's commercial agriculture and livestock sectors to compete in international and national markets in the four target product lines; meat, high value and off season vegetables, mangoes, and citrus.

This partnership acts as a catalyst for development and investment in the target product lines, helps improve the quality and increase the quantity of exportable agricultural produce, and promotes cooperation among farmers, processers, exporters, and buyers of Pakistani agricultural products in international (non-U.S.) markets thus resulting in increased incomes and generating employment opportunities for Pakistani people working in the targeted product line.

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I am the Founder and President of PakAlumni Worldwide, a global social network for Pakistanis, South Asians and their friends. I also served as Chairman of the NEDians Convention 2007. In addition to being a South Asia watcher, an investor, business consultant and avid follower of the world financial markets, I have more than 25 years experience in the hi-tech industry. I have been on the faculties of Rutgers University and NED Engineering University and cofounded two high-tech startups, Cautella, Inc. and DynArray Corp and managed multi-million dollar P&Ls. I am a pioneer of the PC and mobile businesses and I have held senior management positions in hardware and software development of Intel’s microprocessor product line from 8086 to Pentium processors. My experience includes senior roles in marketing, engineering and business management. I was recognized as “Person of the Year” by PC Magazine for my contribution to 80386 program. I have an MS degree in Electrical engineering from the New Jersey Institute of Technology.
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